The third quarter of 2025 was marked by calm and consistent market performance. We see this stability as the logical outcome of three key drivers: passage of the business-friendly "One Big Beautiful Bill" (OB3) Act, the Federal Reserve's anticipated shift to a rate-cutting cycle, and solid corporate earnings, particularly in North America.

The market's positive sentiment was underpinned by:

• Fiscal Support: The OB3 Act provided targeted support to businesses through immediate R&D expensing, permanent bonus depreciation for qualified investments, and increased tax deductions for small businesses.
• Monetary Easing: As widely expected, the Fed initiated a new rate-cutting cycle at its September meeting, providing a tailwind for equities.
• Strong Earnings: S&P 500 companies reported stellar Q2 2025 results, with year-over-year revenue and EPS growth of 6.1% and 12.4%, respectively. This strong performance was especially impactful given the lowered market expectations following a volatile first half of the year.

As of the end of Q3 2025, the funds delivered a year-to-date returns of 18.11%, outperforming several major indices. Our strategy remains focused on companies benefiting from durable secular trends, with notable outperformers in data centers and artificial intelligence. However, our success this quarter was also bolstered by strong performance in our consumer innovation theme, exemplified by companies like Roblox Corp., which highlights the strength of our diversified approach to capturing opportunities.

During the quarter, we increased our positions in select software holdings and initiated a new position in Datadog Inc. We believe the narrative around the "death of SaaS" is overblown. On the contrary, the companies we hold are leveraging AI to innovate and drive long-term growth. We also established new positions in the Application-Specific Integrated Circuit (ASIC) space, where we see an underappreciated growth opportunity tied to the AI data center trend.

We are mindful of the growing concerns about a potential bubble in AI. We constantly reassess this risk, understanding that in any secular growth trend, the challenge is to balance risk and reward.  Two time-tested investment adages help articulate our view on this issue. Firstly, “being too far ahead of your time is indistinguishable from being wrong”. Exiting too early means missing potential appreciation, while excessive optimism can be costly.  The second adage, "Bull markets don't die of old age; they're killed by the Fed." With the Fed now in an easing cycle and combined with fiscal support, we believe these will give a strong tailwind to the capital markets as we enter the final quarter of 2025.

Sep 2025